April 23, 2014

Fund managers reveal five shares for your stocking

Fund managers from Fidelity have revealed their thoughts on five shares that may be worthy of consideration for your Christmas stocking. The shares include domestic and international shares:

Alex Wright, Portfolio Manager of Fidelity UK Smaller Companies Fund and Fidelity Special Values PLC. Alex will assume responsibility for Fidelity Special Situations Fund in January 2014: 

CLS Holdings: “I have become increasingly positive on a number of secondary property stocks recently.  Secondary property has been off most investors’ radars for some time. However, with some confidence returning to the economy, activity has been increasing in the sector, which could create value for companies with attractive development assets. Additionally, many companies are trading at deep discounts to NAVs. These are attributes which appeal to my interest in identifying positive change in unloved companies. One prime example of this is CLS Holdings.”

Michael Clark, Portfolio Manager of Fidelity MoneyBuilder Dividend and Fidelity Enhanced Income funds:

Pearson: “Pearson is a cash generative business, with a strong dividend track record. There is also significant growth potential for its education businesses in emerging markets, where there is little or no public education. Although there are risks around the transition to digital in its key education markets, the move is unavoidable as technology changes and I believe this new business model will make the company less working capital intensive over time. As a result, Pearson will become more like a software company, with strong cash flow and significant operational gearing due to its high fixed costs. Overall, I expect its strong dividend track record to continue”.

Peter Kaye, Portfolio Manager of Fidelity American Fund:

Illumina: “Illumina manufactures equipment for gene analysis and next generation DNA sequencing. It is showing the kind of unparalleled innovation that excites me, and even more importantly, also translates into the creation of completely new markets opportunities in the health care space. The business has become a potential leader in “personalised medicine” and its cutting-edge technological platform will revolutionise the diagnosis, treatment and prevention of diseases. Its ability to bulk analyse individual genes in a cost effective manner has ensured increasing commercial adoption. This is evidenced by the recent shift from a purely research-based customer base to a more clinical one, a development that has actually helped offset some of the more immediate budgetary concerns plaguing the academic end markets.  This is the sort of inflection point I look out for in companies that I own. In fact, the US Food & Drug Administration’s recent green light for the company’s next-generation gene sequencing system to be used in diagnostic applications only serves to underscore my belief in the prospects for this multi-year story.”

Sam Morse, Portfolio Manager of Fidelity European Fund and Fidelity European Values PLC:

Nestlé: “Nestle is the world’s largest food manufacturer, and I am increasingly confident that the company’s renewed focus on capital efficiency and capital allocation is beginning to pay off.  We see an acceleration in the company’s cash generation, allowing for a faster pace of dividend growth looking forward (from an attractive starting level of dividend yield of more than 3%). The recently announced disposal of the Jenny Craig business in the US also demonstrates that this new focus is bringing action.”

Teera Chanpongsang, Portfolio Manager of Fidelity Funds Emerging Asia Fund. Teera will also assume responsibility for Fidelity South East Asia Fund in January 2014:

Hyundai Motor: “Hyundai Motor is South Korea’s largest automobile manufacturer and, together with sister company Kia, it is the world’s 6th largest auto maker. The market has been worried about the competitive impact of a weaker yen on Korean companies. There have also been some questions over Hyundai’s aging model range. However, recent results have shown that the company has a robust and defensive earnings stream and I think it could be an interesting story for 2014. Through efficient production techniques and being in the unique position of producing its own parts, Hyundai has been able to offer customers models with more add-ons and features than competitors in the same price range. This, in turn, has helped improve brand awareness and loyalty, enabling Hyundai to grow in markets outside of Korea, such as China, the US, Europe and in the emerging markets. Also, Hyundai is at the beginning of a new product cycle and its new models coming out over the next 18 months should help to boost sales. Importantly, these models will also sell for a higher price, increasing margins.  From a valuation perspective, it trades at trough multiples whilst its return on equity remains high.”

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